Sweden: Proposes amendments to the taxation of real estate

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The Swedish government has Proposes some tax changes on 30 March 2017, regarding taxation of real estate. The proposal will now be referred to stakeholders for consultation before a final version is handed to Parliament for voting. The new rules are proposed to enter into force on 1 July 2018.

The key features of the process are:

-The sale of a company whish’s assets mainly consist of real estate will, simplified, be taxed as if the real estate was sold separately. The company sold will be liable to pay the tax.

– The stamp duty should no longer be levied on intra-group property transactions and the stamp duty for companies is dropped from 4.5% to 2%.

-Intra-group real estate transactions of land and buildings that can be carried out below market value are to support continuity in terms of acquisition values, accumulated depreciation and the tax residual value.

– A tax impartial transfer of real estate below the fair market value will have no effect on the acquisition value, tax base, and tax reductions made.

South Africa: SARS issues ruling on MFN clause in a treaty with Sweden

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On 1 March 2017, the South African Revenue (SARS) issued a private binding ruling no. BPR 267 regarding dividends tax and the ‘most favoured nation’ clause in a tax treaty concluded with Sweden. The ruling determines whether dividends tax must be withheld when a dividend is paid to the beneficial owner that is a resident of the Kingdom of Sweden. Sweden and South Africa concluded the SA/Sweden tax treaty which, when read with the Protocol, includes a ‘most favoured nation’ clause.

The ruling is mainly issued on the basis of an application from a company incorporated in and a resident of South Africa that is a wholly-owned subsidiary of a company incorporated in and a resident of Sweden. According to ruling, applicant will not be required to withhold dividends tax from the dividend payments to parent company if parent company complies with the documentary requirements in section 64G(3). The ruling describes that the MFN treatment under the treaty with Sweden was triggered by the South Africa – Kuwait Income Tax Treaty (2004).

This binding private ruling is valid for a period of three years from 7 December 2016.

Sweden: Publishes regulation on automatic exchange of CbC reporting

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The regulation on the automatic exchange of country-by-country (CbC) reporting (the Regulation) was published in the Official Gazette on 14 March 2017. The law proposal had been adopted on 1st March 2017. The Regulation, which will enter into force on 1 April 2017 and also available here.

Sweden: Approves the new legislation on transfer pricing documentation and country-by-country reporting

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Sweden’s parliament on 1 March 2017, adopted the government’s proposal on transfer pricing documentation and country-by-country reporting. The adoption amounts to the ratification of OECD’s guidelines for transfer pricing documentation and country-by-country reporting in Swedish tax legislation.

Transfer pricing documentation

The new measures, effective 1 April 2017, adopt transfer pricing documentation rules that reflect the standards in the OECD’s base erosion and profit shifting (BEPS) Action 13 final report. The legislation complies with OECD’s recommendations so that the transfer pricing documentation will consist of a Master file and Local files.

Documentation requirements

The new documentation requirements are effective for financial years beginning 1 April 2017 or later. The Master file must be prepared by the time when the tax return of the parent company is due, and the Local file must be prepared by the time the tax return of the local entity is due.

Companies will be exempt from the requirement to file transfer pricing documentation if the year prior to the subject financial year, the company had less than 250 employees and either have reported revenues not exceeding SEK 450 million or total assets not exceeding SEK 400 million.

In addition, the legislation expands the scope of those taxpayers required to prepare transfer pricing documentation to include: (i) Foreign companies with permanent establishments in Sweden; and (ii) Swedish companies with permanent establishments abroad.

Swedish unlimited partnerships (pass-through entitles) if there are transactions with a foreign company and the unlimited partnership’s profits, are taxed in a Swedish company that is in a group with both the unlimited partnership and the foreign company

Swedish companies, unlimited partnerships or permanent establishments that are not required to prepare transfer pricing documentation are nonetheless required to price all internal transactions at arm’s length.

Country-by-country reporting

Similarly, there are new rules introduced for country-by-country (CbC) reporting and for the automatic exchange of those CbC reports with tax authorities both in the EU and in countries and jurisdictions which have signed the multilateral agreement on automatic exchange of information for CbC reports—the Multilateral Competent Authority Agreement (MCAA). The CbC report will be due by 31 December 2017 at the latest (pertaining to financial years commencing 1 January 2016 or later).

Under the new rules, multinational groups for the year prior to the financial year with revenues exceeding SEK 7 billion will be required to submit certain data every year for each jurisdiction in which they are active. Normally, it will be the parent company of the multinational group that will submit the CbC report to the tax authority of the country where it is active.

A CbC report must include the following information on indicators of economic activity for each country in which the taxpayer’s group operates in:


-Profit or loss before income tax.

-Paid and accumulated income tax.

-Share capital.

-Accumulated profits.

-Number of employees.

-Tangible assets except cash.

Where the parent is resident abroad and that country does not require a CbC report, a Swedish subsidiary may be required to submit the report on behalf of the parent. Penalties will apply for failure to submit a CbC report to the tax agency.

With respect to master and local file requirements, an exception will apply to small and medium-sized enterprises, which are companies that have less than 250 employees and whose annual turnover does not exceed SEK450 million or assets do not exceed SEK400 million.

Sweden: No new bank tax before 2018

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The government announced on 24 February 2017 its decision to withdraw plans to introduce a special tax on banks and other financial institutions. The bank tax was originally intended to eliminate the tax advantage the banking sector receives due to the fact that financial services are exempt from VAT.

Sweden: Government plans excise duty on certain electronic products

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Recently, the Swedish Government proposed a new legislation regarding tax on chemicals in certain consumer products. Accordingly, the following procedures are proposed:

(i) Products subject to excise duty are defined using the tariff classification in the European Community’s Combined Nomenclature (CN codes), and thus the proposed legislation lists a number of CN codes for the products intended to be taxed.

(ii) The proposed excise duty rate is approx. US$1 per KG for kitchen appliances and approx.

(iii) The taxable persons are commercial manufacturers and importers of the relevant goods. There is also a possibility to become taxable by registering as an approved warehouse holder.

(iv) The tax is due when the taxable goods are manufactured or brought into Sweden. Also, approved warehouse holders can defer the tax until the goods are delivered to someone who is not an approved warehouse holder, moved to one of the approved warehouse holders’ stores for retail sale or used for purposes other than sales and when the approval as warehouse holder is revoked.

(v) A deduction of 50% of the excise duty should be allowed for electronic products that do not contain additive compounds of bromine, chlorine or phosphorus.

(vi) Distance sales of the relevant goods by foreign producers/retailers directly to Swedish consumers are not taxed.

Furthermore, there is no tax liability for goods delivered to approved warehouse holders. Goods that have already been taxed, delivered to customers in other countries, completely destroyed by unforeseen events or force majeure, left for recycling or have been reused in the manufacturing of taxable goods are not taxable for approved warehouse holders.

This law will be effective from 1 April 2017 and applicable from 1 July 2017.

Sweden: Administrative Court rules PE exists in Sweden due to regular nature of activities

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The Swedish Administrative Court of Appeal in the case of: Gothenburg (Kammarrätten i Göteborg) case number 2276-15, has found a German company to have a permanent establishment (PE) in Sweden due to its annually recurring short-term activities in the winter environment in northern Sweden. Although the six-month threshold was not passed in any of the years in question, the recurring activities were considered sufficient to constitute a fixed place of business.

The conclusions of the Court were that the company regularly conducts business from the same place in Sweden.  The Court also stated that the tests in Sweden cannot be considered to be of a preparatory or auxiliary nature, therefore the company had established a fixed place of business in Sweden through which a part of the company’s core business was carried out. The time to appeal expired at the end of December 2016. The decision has not been appealed to the Supreme Administrative Court and the ACA’s decision is consequently final.

This decision confirms the strict interpretation of the Swedish Tax Agency and Swedish Courts when it comes to PE assessments in general and the exemption for preparatory and auxiliary activities in specific. However, this decision distresses many companies carrying on the same or similar activities in northern Sweden.